A senior regulatory affairs executive argues that banking regulation has reached an inflection point. As geopolitical tensions, economic uncertainty, and market transformation reshape risk, regulators and financial institutions have an opportunity to reas
Financial institutions are entering a
period of profound regulatory reassessment as geopolitical fragmentation,
economic uncertainty, and structural shifts in financial markets challenge
assumptions that have shaped banking supervision for nearly two decades.
A senior legal and regulatory affairs
executive at a major North American bank argued that both regulators and
financial institutions have reached a point where existing frameworks should be
re-examined to determine whether they remain fit for purpose in an increasingly
complex operating environment.
Speaking ahead of a major industry
conference focused on risk and regulation, the executive suggested that many of
today's supervisory structures were designed in response to the global
financial crisis and have delivered significant benefits in terms of resilience
and stability.
However, the banking landscape has
evolved considerably since those reforms were first introduced.
"I think it's really a good time
to take out the old playbooks and evaluate them," said the Chief Counsel
for Legal Regulatory Affairs and Policy at a major North American bank.
"We should look at what is
working and what is not, because many of the regulations we have today were put
in place after the financial crisis almost twenty years ago."
The comments come at a time when
regulators and financial institutions are grappling with a markedly different
set of challenges than those that dominated policy discussions following the
collapse of global financial markets in 2008.
Geopolitical tensions, sanctions
regimes, trade disputes, supply chain disruptions, and technological
transformation are increasingly influencing the risk landscape.
While these developments have added
complexity to regulatory decision-making, the senior executive stressed that
policymakers remain fundamentally focused on economic performance and financial
market stability.
"The economy and capital markets
are really important," he said. "People are very cognizant of what is
happening in the economy and in the capital markets when thinking about
regulation."
For financial institutions, adapting
to these changes requires more than compliance with existing rules.
The executive argued that risk
management must remain central to decision-making as banks confront shifting
macroeconomic conditions, evolving geopolitical alignments, and changing
patterns of market activity.
"I think risk management and
thinking about these risks is really the backbone of a bank," he said.
However, he emphasized that
resilience is not created solely through models, frameworks, or regulatory
requirements.
Institutions also depend heavily on
experienced professionals who can interpret market developments, identify
emerging trends, and respond before risks become crises.
"What is really helpful is when
you have key subject matter experts who know the markets and can read the
trends and understand what is happening," he said. "That depth allows
you to pivot quickly and adjust business models when conditions shift."
Recent years have demonstrated how
rapidly new threats can emerge. Market disruptions, liquidity stresses, and
unexpected economic shocks have repeatedly challenged institutions across the
financial sector.
"I think we've had some
instances over the last few years where seemingly the risks showed up out of
nowhere," he observed.
Yet the executive argued that
regulators already possess substantial tools to assess emerging threats.
Supervisory authorities can access extensive data, conduct stress testing
exercises, evaluate different economic scenarios, and perform detailed reviews
of institutional resilience.
